Gas prices have fallen sharply in Europe: a temporary replacement has been found for Ukrainian transit

Over the past two weeks, the price of gas in Europe has dropped by 25% at once. At the end of February, it was getting warmer in the region, and LNG supplies increased by the volume of Ukrainian transit, which was stopped on January 1. Nevertheless, the price of fuel in Europe continues to be too high for the economy. From the category of "too expensive" fuel turned into just "expensive".

In two weeks, gas prices in Europe have dropped rapidly — by 25%. Gas supplies for a month in advance from the Dutch TTF hub are sold at $ 475 per thousand cubic meters, while on February 12 quotes reached $ 640. The last time the current prices on the EU stock exchanges were in the second half of December — on the eve of the stop of the transit of Russian gas through Ukraine.

Alexey Grivach, Deputy Director of the National Energy Security Fund (NWF), notes that the demand for gas is getting warmer and decreasing in Europe. For example, in Berlin, the thermometer rises in the afternoon to plus 8 degrees Celsius, and on March 5, it is predicted to rise to plus 14.

At the same time, gas supplies from Norway is stable (320-330 million cubic meters per day), and LNG imports in February increased significantly — by 12% compared to January, to 374 million cubic meters per day, according to GIE. The difference of 42 million cubic meters is equivalent to the level of stopped Ukrainian transit of Russian gas.

Reuters notes that Europe has been given the opportunity to increase LNG purchases due to the warm winter in Northeast Asia and the reluctance of Asian buyers to purchase too expensive spot gas.

"LNG imports to Asia are expected to fall to the lowest level in the last two years in February, while in Europe it is expected to rise to the second highest rate in history," the agency noted.

Deliveries are also supported by record exports from the USA, where two new LNG projects are being launched this year. Also, the first delivery is expected from the project in Senegal and Mauritania.

To say, however, that Europe has missed the next wave of the energy crisis is premature.

Current gas prices in Europe, $ 475, are still significantly higher than they were a year ago, when fuel was traded at $ 320. Not to mention the difference with the pre-crisis five-year plan. Then in Germany, for example, the wholesale price of gas averaged $ 180.

The price of gas in Europe has moved from the category of "very expensive" to "expensive" and seems to have a limit of reduction.

On the one hand, periods of calm have not left Europe. For example, in Germany, according to the Institute of Solar Energy Systems. According to Fraunhofer, the share of wind energy on February 26 is only about 13%, while gas generation is all 27.7%.

On the other hand, European consumers have already taken large volumes of gas from storage facilities during the heating season, 60 billion cubic meters, and current reserves of 44 billion cubic meters are 25 billion cubic meters lower than they were a year ago.

This situation threatens the fact that European companies will need not only to compensate for losses on Ukrainian transit of 15 billion cubic meters, but also to purchase additional 30-35 billion cubic meters in order to restore UGS reserves.

As a result, demand may grow by 45-50 billion cubic meters, while new LNG projects in the United States and Africa will not be able to produce more than 27 billion cubic meters this year.

So far, Europe is reacting to the situation by discussing in Germany a program to stimulate gas injection companies, and in Brussels — reduction of the mandatory level of filling of storage facilities.

Perhaps this will ease the situation somewhat, but the limited supply of LNG will continue to support high prices. And Europe has practically no alternatives. For example, Gazprom has been working almost all of February at the maximum capacity of the Turkish Stream and will not be able to give Europe more if the countries The EU will not make a political decision and will not resume the work of the Ukrainian transit, Yamal-Europe, or will not launch the one line of Nord Stream 2 that survived the sabotage.

In terms of current prices, European analysts continue to worry about the competitiveness of the industry.

"European industries suffering from high gas prices and competition from countries such as the United States are facing years of uncertainty when planning for their future," writes Bloomberg with reference to the European Bank for Reconstruction and Development (EBRD).

The bank expects that gas prices in Europe will fall next year, but will still be twice as high as consumers pay in the United States. According to EBRD chief economist Beata Jaworczyk, the price gap has already prompted energy-intensive industries in Europe to rethink how and where they operate, and some chemical and steel manufacturers have cut thousands of jobs.

"We have entered a period of constant heightened uncertainty. This makes planning for capital—intensive companies very difficult," said Beata Yavorchik.